1) Explain why price controls lead to market disequilibrium.

2) Using a production possibility frontier model to illustrate economic decline.

3) Draw a graph illustrating excess demand and explain what is likely to occur in this market that is experiencing this type of market disequilibrium.

4) Refer to the exhibit below, the economy is currently operating at point C. Compute the opportunity cost of moving to point D.

WU U 40 Fax Machines (thousands per year) LL O Television Sets (thousands per year)